Albania: Economic and Political Outline

Economic Indicators

Albania was the last central and eastern European country to adopt free-market reforms. Even though the country's economy has improved during the last few years, Albania still remains one of the poorest countries in Europe. In 2014, one in seven inhabitant still lives below the poverty threshold and nearly 50% of the GDP is made up by the informal economy, a fact which has hindered the current economic reform program.

However, with its solvent and well-capitalized banking, in 2009 and 2010 Albania resisted the global crisis better than its Balkan neighbours, due to its still limited international openness and the development of global prices of raw materials. The country has escaped the recession during the years of crisis, although the fall in activity in the EU and the neighbouring countries of Southeastern Europe weighed heavily on the economy. Greece is a major trading partner and investor, as well as a provider of remittances from the diaspora and its economic difficulties since 2011 have been felt strongly in Albania.

The current government is pursuing a program focused on the fight against corruption, organized crime and trafficking, and the implementing of liberal reforms designed to prepare Albania for future EU membership and able to attract foreign investors.

To the extent that Albania is a country only moderately integrated into global capital flows, the impact of the international situation has been less dramatic than in other countries of Eastern Europe. The country grew only by 1.7% in 2013 (after only 0.5% in 2012). The economy is burdened by a debt of more than 60% of GDP in 2013, exports at half mast and a significant drop in remittances from Albanian migrants living abroad. Albania's economic results are linked to the recession in the eurozone, an area receiving over 80% of its export.

The development of the country in the coming years could also be helped by the expectations of an official application for accession to the European Union.

In 2014, the Albanian economy remains fragile and dependent on outside institutional assistance.

Main Indicators

2011

2012

2013

2014

2015 (e)

GDP (billions USD)

12.68

12.17

12.72

13.59e

14.52

GDP (Constant Prices, Annual % Change)

2.3

1.1e

0.4

2.1

3.3

GDP per Capita (USD)

4,460e

4,321e

4

4,900e

5,261

General Government Gross Debt (in % of GDP)

60.4

62.9

70.5

72.1

71.6

Inflation Rate (%)

3.4

2.0

1.9e

1.8e

2.7

Unemployment Rate (% of the Labor Force)

14.0

13.4

15.6

14.0

13.5

Current Account (billions USD)

-1.69

-1.22e

-1.32e

-1.50e

-1.85

Current Account (in % of GDP)

-13.3

-10.0e

-10.4

-11.0e

-12.7

Source:
IMF - World Economic Outlook Database
, Last Available Data

Note: (e) Estimated Data

Main Sectors of Industry

The share of agriculture in the GDP is 17.5%. The sector employs 42.9% of the active population. Agricultural production is concentrated on wheat, corn, oats, sorghum, cotton, potatoes, vegetables, the olive, tobacco, fruits, beet sugar, vines, livestock farming and dairy products. Agriculture suffers from the lack of modern equipment, ownership and land parceling problems, all of which lead to a relatively low productivity. It has to be noted that agricultural production is higher than its share in the GDP. As a matter of fact, a large part of the produce is consumed by the farmers themselves and, therefore, it is not sold.

In 2013, the industrial sector accounted for 15.3% of the country's GDP and employed 23.9% of the active population. The sector is concentrated on food processing, textiles and clothing, timber work (construction), oil, cement, chemical products, mining, transport and hydraulic energy.

The services sector represented 67.2% of the GDP in 2013, employing a third of the active population (33.2% in 2012). Tourism, telephony, the banking and insurance sectors are in full expansion.

During the last past years, the share of income from the agricultural and industrial sectors has been falling progressively. In parallel, the part of the services sector is increasing each year and the sector has been a key driver of the Albanian economy.

The sectors of telecommunications, energy, minerals and medical equipment are expected to develop in the following years and they offer good opportunities.

Indicator of Economic Freedom

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Country Risk

Foreign Trade in Figures

Albania is focused on imports. In these recent years, imports have registered a growth of more than 25%. The main import goods are high value-added products such as machinery and equipment, metals, vehicles and means of transport. Albania's main suppliers are Italy (over 28% of total imports in 2013), Greece and China (over 10%%) and then Turkey (5%). The country mainly exports mineral ores (over 15% of the total exports), as well as textile products and shoes, metal, crude oil, vegetables, fruits and tobacco.

Albania's main customers are Italy (over 50% of export), Turkey, Kosovo and Greece. In 2013, the European Union remained Albania's main trading partner, representing more than 65% of Albanian imports and 70% of Albanian exports. The country has a structural trade deficit. The increase in imports is due to the rise of international prices in certain goods and electricity. Additionally, exports are neither sufficiently diversified nor competitive in terms of prices. Furthermore, the economic crisis has had an impact on exports, which experienced a sharp drop after 2008 since Albania's commercial partners, also affected by the crisis, have reduced their demand for Albanian products.

The worsening position of Albania's key trading partners (Italy and Greece in particular) should continue to have a negative impact on the country's trade balance in 2014.

Foreign Trade Indicators

2009

2010

2011

2012

2013

Imports of Goods (million USD)

4,550

4,406

5,396

4,882

4,855

Exports of Goods (million USD)

1,091

1,545

1,951

1,968

2,331

Imports of Services (million USD)

2,215

1,990

2,235

1,861

2,085

Exports of Services (million USD)

2,348

2,256

2,398

2,069

1,998

Imports of Goods and Services (Annual % Change)

-

5.4

6.1

-6.6

2.7

Exports of Goods and Services (Annual % Change)

-

0.6

7.4

-0.6

6.1

Imports of Goods and Services (in % of GDP)

53.8

53.0

56.7

51.9

52.9

Exports of Goods and Services (in % of GDP)

29.6

32.4

34.0

33.3

35.1

Trade Balance (million USD)

-3,392

-3,038

-3,499

-2,859

-2,518

Trade Balance (Including Service) (million USD)

-2,967

-2,458

-2,933

-2,297

-2,310

Foreign Trade (in % of GDP)

83.4

85.5

90.8

85.2

87.9

Source:
WTO - World Trade Organization
; World Bank
, Last Available Data

Political Outline

Executive Power

The President is the head of state and elected by a three-fifths majority vote of all Assembly members for a 5 year term. Although the position is largely ceremonial, the Constitution does give the President authority to appoint and dismiss some civil servants in the executive and judicial branches. The Prime Minister is the head of the government and holds the executive powers. The Prime Minister is appointed by the President and approved by a simple majority of all members of the Assembly. The Prime Minister nominates the Council of Ministers which must be approved by the President.

Legislative Power

The legislature in Albania is unicameral. The parliament, called People's Assembly, consists of 140 seats, out of which 100 are elected by direct popular vote and the remaining 40 seats are distributed by proportional representation. All members serve 4-year terms. Albanians enjoy limited political rights.

Main Political Parties

A number of political parties operate within the country, but the most important political parties are: the PD (Democratic Party) and the PS (Socialist Party). Albanian society remains very much clan-based. In general, the PD commands the allegiance of the Gheg clans located in the North of the country while the PS has the support of the Tosk clans located in the South. The Greek minority is mostly represented through the PBDNj (Party of the Union for Human Rights). Muslim leaders were prevented from registering a party called Motherland in 2004 because religiously or ethnically based parties are illegal in Albania.

Indicator of Freedom of the Press

The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

Indicator of Political Freedom

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.